APS pulls out of the race for HSBC

APS has pulled out of the race to take over HSBC Malta, withdrawing its bid on Thursday.

In a company announcement, APS did not specify the exact reason why it was pulling out of the mega deal, but said "confidential information external to the due diligence exercise has caused the bank to reconsider its participation in the sale process".

APS was, to date, the only bidder to have formally confirmed its interest in acquiring HSBC Continental Europe’s 70.03% stake in HSBC Malta.

APS said it had notified HSBC Holdings plc that it is "regrettably withdrawing" from the bidding process.   

"The bank’s board of directors and executive team, supported by their local and international advisers, had been optimistic about pursuing this potential acquisition.  In particular, the potential deal was an opportunity to promote consolidation in the banking sector, in line with European initiatives, with a view to creating an enlarged local bank to serve the market in the Maltese Islands,"  APS said.

It added that the bank holds the management and employees of HSBC Bank Malta plc in high esteem and believes that a combination of the two entities could have been an attractive strategic initiative, capable of delivering benefits across the stakeholder universe.  

"Further, the investor community, local and international, had warmly responded to invitations from the Bank and its advisers to discuss the potential transaction. 

APS thanked its shareholders, in particular the qualifying shareholders AROM Holdings Ltd and the Diocese of Gozo, for their trust and support. The bank also thanked its employees, and advisers.

"Following this decision, the bank remains focused on growth and will be open to strategic opportunities that may arise, always guided by the highest standards of governance, transparency, ethics and financial rigour."

APS had emerged as an early favourite when HSBC announced its possible exit from Malta, as it had been in negotiations for several months.

APS’ bid had raised eyebrows in both government and ecclesiastical circles.

Last month, Finance Minister Clyde Caruana warned that Malta needs “more banking competition, not less,” echoing concerns expressed by several banking experts about replacing an international bank with a local player.

Similarly, the Nationalist Party had also called for a major international bank to fill HSBC’s shoes.

Meanwhile, several members of the clergy had also expressed reservations about the potential buyout.

In October, Gozo Bishop Anton Teuma said that people should not allow money to “lead us by the nose,” when discussing the issue of APS’ acquisition plans during a homily.

The Maltese Curia, APS’ largest shareholder, also appeared uncertain about the deal.

While the Curia’s administrative secretary, Michael Pace Ross, argued that the Church was “retreating” from the banking sector by diluting its shareholding, Archbishop Charles Scicluna said the matter was “far from a done deal”.

Meanwhile, several prominent members of the clergy publicly expressed their concern that the acquisition would “strengthen a widespread perception that the Church is wealthy,” and run counter to its mission as a “poor Church (that) values grace before financial security”.

The Maltese Archdiocese holds roughly 55% of APS Bank’s total shares, with the Gozitan Diocese holding just under 13%.

With APS out of the running, the remaining two known bidders are Hungarian bank OTP and a local consortium of businesses who have teamed together to submit a bid.

But it is likely that more bidders will emerge over the coming months, with discussions over HSBC’s sale still at a relatively early stage.

HSBC had reported receiving “a number” of bidders, in a company announcement last November. But the bank’s shareholders were left none the wiser as to how many bids were on the table, with HSBC Malta’s top management saying “in all transparency, we do not know” at a rowdy EGM held in February.

In practice, HSBC Malta has little say in the negotiations, with the sale handled entirely by its majority shareholder, HSBC Continental Europe.

HSBC Malta has been contacted for comment.